Market abuse
Conduct that artificially manipulates prices or volumes of securities in capital markets — wash trading, spoofing, layering — or creates false appearances of liquidity.
Linguistic warning signals
- references to coordinated buy/sell orders without intent to execute
- discussions about moving the price before a trade
- coordination of volumes to create liquidity appearance
Why it matters
Market abuse differs from other conduct types because it doesn't require coordination with an external third party — it can be executed entirely within a single firm's trading desk. This makes it harder to detect with traditional audit controls, which tend to focus on transactions between different parties. Internal communications — trading chats, documented verbal instructions — are often the only evidence available before the trading pattern becomes visible to the market regulator.
Relevant regulatory framework
- Chile — Law 18.045 (Securities Market Law), CMF
- Brazil — Lei 6.385/1976, CVM
- EU — Market Abuse Regulation (MAR)
- USA — SEA § 9, 10(b); Rule 10b-5
Recommended action
- 1Escalate to market compliance any instruction to coordinate orders without real intent to execute them.
- 2Preserve the full communication record associated with the questioned trade.
- 3Check whether the volume pattern coincides with periods of genuinely low liquidity for the instrument.
- 4Report internally before the trade shows up in the regulator's surveillance systems.
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